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Comex gold futures were sharply lower on Thursday as the dollar strengthened against a basket of currencies after the Federal Reserve indicated it could rise borrowing costs faster than expected.
The only support for gold now can come in the form of pick-up in physical demand from India ahead of the festival season.
Comex gold futures fell lower in line with our expectations. As mentioned in the previous update, though near-term support is seen at $1,240 an ounce, possibility that prices could eventually breaking lower and heading towards recent lows at $1,180 levels looked likely. Resistances will now be seen at $1,240-45, followed by $1,265 levels.
Prices are expected to gradually inch towards $1,185-1,200 levels, being a crucial trend line resistance support point. A close below $1,175 should open the downside for an even sharper move lower towards $1,050 levels.
Only a close above $1,297 could cause doubts on our bearish view. Such a rise could take prices higher towards $1,310-15 again, which we do not favour presently.
Favoured view still expects prices to get capped in the $1,235-40 range and decline again.
The wave counts have to be revisited again. Fall below $1,250 has forced us to abandon any bullish hopes and look at a bearish one targeting $1,050.
We feel the present set of moves from $1,175 to $1,435 is a corrective wave four in an impulse which began from the high of $1,920, with a equality target at $1,020. Ideally, from this are a pullback higher towards $1,300 looks likely.
RSI is in the oversold zone now indicating a possible upward correction or a retracement in the offing. The averages in MACD are still below the zero line of the indicator indicating a bearish reversal.
Only a cross over again above the zero line could hint at a possible bullish reversal again.
Therefore, look to sell gold on rallies to $1,240-45 zone with a stop loss at $1,266 targeting $1,200 and 1,145.
Supports are at $1,200, 1,175 and 1,145 and Resistances are at $1,240, 1,265 and 1,285.
The writer is the Director of Commtrendz Research. There is risk of loss in trading.
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